Consumer sentiment improved in December as Americans became more optimistic about their personal finances and inflation expectations declined.
The University of Michigan’s index of consumer sentiment climbed to 53.4 from November’s reading of 51. This 4.5 percent rise was better than economists had forecast and the first improvement in overall sentiment in five months.
The increase was primarily concentrated among younger voters, said Joanne Hsu, the director of the consumer survey.
The gauge of current conditions worsened slightly, slipping to 50.7 from 51.1. The expectations gauge jumped to 55 from 51.0, reflecting a more optimistic outlook across a variety of measures.
“Overall, while views of current conditions were little changed, expectations improved, led by a 13 percent rise in expected personal finances, with improvements visible across age, income, education, and political affiliation,” Hsu said in her comment to Friday’s report.
The expectations gauge improved across the political lines but was particularly notable among independents. The index for Republicans rose to 92.2 from November’s 91.1. Among Democrats, it rose to 33.7 from 30.2. Among independents, the expectations index soared to 53.7 from 45.9, hitting the best level since August.
Inflation expectations for the year ahead declined for the fourth consecutive month. Consumers now expect inflation to run at 4.1 percent, down from 4.5 percent in November. That is the lowest reading since January’s 3.3 percent. Long run inflation expectations also declined, dropping from 3.4 percent last month to 3.2 percent in December, matching the January 2025 reading.
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